M/s. Kailash Chand Poddar & Sons, New Delhi V. ITO, New Delhi

ITA 2303/DEL/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 6989 (ITAT-DELHI)
• Duration Of Justice: 4 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-09-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC 1
• Next Hearing Date: 26-09-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 28-04-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Sale consideration of property below Jantri Value; Cost of acquisition; Fair market value
• Section: 50C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : SMC-I : NEW DELHI BEFORE SHRI R.S. SYAL, ACCOUNTANT MEMBER ITA NO.2303/DEL/2016 ASSESSMENT YEAR : 2009-10 KAILASH CHAND PODDAR & SONS, C/O KAPIL GOEL, ADVOCATE, F-26/124, SECTOR-7, ROHINI, NEW DELHI. PAN: AAEHK4023P VS. ITO, WARD-20(2), NEW DELHI. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI KAPIL GOEL, ADVOCATE DEPARTMENT BY : SHRI RAJESH KUMAR, SR. DR DATE OF HEARING : 26.09.2016 DATE OF PRONOUNCEMENT : 26.09.2016 ORDER THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER PASSED BY THE CIT(A) ON 15.2.2016 IN RELATION TO THE ASSES SMENT YEAR 2009-10. ITA NO.2303/DEL/2016 2 2. NO GROUND OTHER THAN CHALLENGING THE SUSTENAN CE OF ADDITION OF RS.33,77,730/- ON MERITS WAS PRESSED BY THE LD. AR. THUS, ALL OTHER GROUNDS, INCLUDING CHALLENGING THE INITIATION OF RE -ASSESSMENT, ARE DISMISSED AS NOT PRESSED. 3. COMING TO THE MERITS OF THE CASE, THE FACTS ARE THAT THE ASSESSEE SOLD A PROPERTY SITUATED AT MALIWARA, CHANDNI CHOWK, DEL HI ADMEASURING 293.15 SQ. MTR. FOR A CONSIDERATION OF RS.29.25 LAC . ON PERUSAL OF THE SALE DEED, THE AO OBSERVED THAT STAMP VALUE WAS RS.1.14 CRORE, WHEREAS CAPITAL GAIN WAS COMPUTED WITH REFERENCE TO THE AMO UNT OF SALE CONSIDERATION. INVOKING THE PROVISIONS OF SECTION 50C, THE AO OPINED THAT THE LONG-TERM CAPITAL GAIN OUGHT TO HAVE BEEN COMPU TED BY TAKING THE SALE CONSIDERATION AT RS.1.14 CRORE AND NOT RS.29.25 LAC , BEING THE SALE CONSIDERATION DECLARED IN THE SALE DEED. ON BEING C ALLED UPON TO EXPLAIN THE REASONS FOR NOT CONSIDERING CIRCLE RATE AS FULL VALUE OF CONSIDERATION IN TERMS OF SECTION 50C OF THE ACT, THE ASSESSEE SUBMI TTED THAT THE ENTIRE BUILDING WAS LET OUT AND IN OCCUPATION OF TENANTS. THE LD. AR PUT FORTH THAT, APPLYING RENT CAPITALIZATION METHOD, THE VALU E OF THE PROPERTY COMES AT RS.7,34,750/-. SINCE THE ACTUAL SALE CONSIDERAT ION OF RS.29.25 LAC WAS ITA NO.2303/DEL/2016 3 MORE THAN THIS, THE CAPITAL GAIN WAS STATED TO HAVE BEEN COMPUTED ACCORDINGLY. THE AO REFERRED THE MATTER OF VALUATI ON OF THIS PROPERTY TO THE DVO, WHO DETERMINED ITS FAIR MARKET VALUE AT RS .65,55,600/-. THE AO ADOPTED THIS FIGURE AS THE FULL VALUE OF CONSIDERAT ION AND WORKED OUT THE AMOUNT OF LONG-TERM CAPITAL GAIN AT RS.33,77,730/- BY REDUCING COST OF ACQUISITION AMOUNTING TO RS.31,77,870/- FROM THE FA IR MARKET VALUE AS PER DVOS REPORT AT RS.65,55,600/-. THE ASSESSEE REMAI NED UNSUCCESSFUL BEFORE THE LD. FIRST APPELLATE AUTHORITY. THAT IS HOW, THE APPEAL IS BEFORE ME. 4. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERU SING THE RELEVANT MATERIAL ON RECORD, IT IS OBSERVED THAT THE DVO HAS DETERMINED THE VALUE OF THE PROPERTY BY APPLYING THE LAND AND BUILDING M ETHOD AND COST REPRODUCTION METHOD. IN THE ABSENCE OF ANY SALE IN STANCES AVAILABLE, THE DVO TOOK UP CIRCLE RATE FOR DETERMINING THE `COST O F LAND AND ALLOWED REBATE OF 40% FOR OLD TENANCY. VALUE OF THE `BUILD ING WAS DETERMINED AT RS.8,66,800/- BY CONSIDERING COST OF CONSTRUCTION. IT IS UNDISPUTED THAT THE ENTIRE PROPERTY WAS LET OUT TO TENANTS AND THE SAME WAS SOLD AS SUCH FULLY ENCUMBERED. UNDER SUCH CIRCUMSTANCES, THE DVO CANN OT BE CONSIDERED ITA NO.2303/DEL/2016 4 AS REASONABLE IN APPLYING THE LAND AND BUILDING MET HOD FOR DETERMINING THE VALUE OF LAND AND ALLOWING A REBATE OF 40%. TH E DELHI BENCH OF THE TRIBUNAL VIDE ITS ORDER DATED 27.3.2015 IN MAHESH CHAND JAIN VS. ITO (ITA NO.203/DEL/2012), HAS HELD IN THE CONTEXT OF SECTION 50C THAT THE FAIR MARKET VALUE IN THE CASE OF LET OUT PROPERTIES SHOULD BE COMPUTED BY RENT CAPITALIZATION METHOD. THE TRIBUNAL WAS PLEASE D TO RESTORE THE MATTER TO THE FILE OF AO FOR RE-DETERMINING THE VALUE OF R ENTED PROPERTY ON THE BASIS OF RENT CAPITALIZATION METHOD. IN REACHING TH IS CONCLUSION, THE DIVISION BENCH RELIED ON THE JUDGMENT OF THE HONBL E JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. NEW INDIA CONSTRUCTION COMPANY (1980) 123 ITR 68 (DEL). IN THE ABSENCE OF ANY DISTINGUISHING FEATURE HAVI NG BEEN BROUGHT TO MY NOTICE AND RESPECTFULLY FOLLOWING THE PRECEDENT, I SET ASIDE THE IMPUGNED ORDER AND REMIT THE MATTER TO THE FILE OF AO FOR REDETERMINING THE AMOUNT OF CAPITAL GAIN BY TAKING INTO CONSIDERATION THE VALUATION OF LAND AS PER THE RENT CAPITALIZATION ME THOD, IF THE SAME TURNS OUT TO BE LESS THAN THE FULL VALUE OF CONSIDERATION REALIZED. NEEDLESS TO SAY, THE ASSESSEE WILL BE ALLOWED A REASONABLE OPPO RTUNITY OF BEING HEARD. ITA NO.2303/DEL/2016 5 5. IN THE RESULT, THE APPEAL IS PARTLY ALLOWE D FOR STATISTICAL PURPOSES. THE ORDER PRONOUNCED IN THE OPEN COURT ON 26.09.20 16. SD/- [R.S. SYAL] ACCOUNTANT MEMBER DATED, 26 TH SEPTEMBER, 2016. DK COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT AR, ITAT, NEW DELHI.